The fight against poverty depends on economic freedom

Montreal, October 25, 2018 – Provincial and federal elections always bring with them a whole slew of promises. Inevitably, the various political parties propose to further intervene in the economy and in people’s lives. However, a publication launched today by the MEI shows, evidence in hand, that the wealth of a nation depends instead on less government intervention and more economic freedom.

Recent history thus shows that countries with more economic freedom experience more growth, which is to say incomes and consumption levels that are high or growing for most of the population. In contrast, the least free countries sometimes don’t grow at all.

“The two Koreas provide a telling example. They shared the same culture and were at roughly the same level of development when they separated in 1948. But they subsequently followed very different paths: a good measure of economic freedom in the South, and none in the North. We know the result. GDP per capita in the South is now 20 times higher than in the North!” points out Pierre Lemieux, author of the publication.

Economic growth is not a matter of natural resources, but rather of good institutions—including the rule of law, private property, and economic freedom—insists Mr. Lemieux. “We see it in Hong Kong, a tiny, resource-poor country that nonetheless ranks as the economically freest in the world. Thanks to this economic freedom, Hong Kong’s GDP per capita had reached 108% of the Canadian level in 1997, whereas it was just 33% in 1950,” explains Mr. Lemieux.

For several decades now, many governments of poor countries have allowed greater economic freedom, helping billions of human beings escape poverty. As a result, between 1981 and 2015, the proportion of the world population living in extreme poverty (on less than $1.90 a day) fell from 42% to 10%. “This contrasts sharply with the disaster taking place right now in Venezuela, where the government tries to control everything,” adds Mr. Lemieux.

The publication also notes that certain government interventions can actually lead to growing inequality, like anticompetitive privileges (including protectionist barriers and the excessive protection of intellectual property) and subsidies to corporations. Such interventions, often called “crony capitalism,” mainly benefit the rich.

“More economic freedom is morally defensible and economically beneficial for the vast majority of individuals. Public policy should thus be based on a strong presumption in favour of economic freedom. Indeed, citizens would benefit if politicians promised more economic freedom and less government intervention, instead of doing the opposite,” concludes Michel Kelly-Gagnon, President and CEO of the MEI.

The Economic Note entitled “What Are the Benefits of Economic Freedom?” was prepared by Pierre Lemieux, Senior Fellow at the MEI, in collaboration with Alexandre Moreau, Public Policy Analyst at the MEI. This publication is available on our website.

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The MEI is an independent public policy think tank. Through its publications and media appearances, the MEI stimulates debate on public policies in Quebec and across Canada by proposing reforms based on market principles and entrepreneurship.

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Interview requests: Pascale Déry, Vice President, Communications and Development, MEI. Tel.: 514-273-0969 ext. 2233 / Cell: 514-502-6757 / E-mail: pdery@iedm.org